BigThink asked some great young economists about big ideas in economics. I’m not very sanguine about any of these guys finding something important very soon. It starts with Paul Krugman, lamenting that:The central cause of the profession’s failure was the desire for an all-encompassing, intellectually elegant approach that also gave economists a chance to show off their mathematical prowess.
Krugman got his Nobel Prize for a mathematically elegant model of international trade. There was no new, true and important insight of that model, it was merely an elegant rationalization of some stylised facts that has zero predictive power and is 99% orthogonal to anything he himself actually discusses about economics. I glad to see he sees the pointlessness of such parochial models. Will he give back his Nobel Prize?
Here are some great insights or projected intellectual trends, from young star economists.
People in developing countries are poor because wages are low, and wages are low because firms are very unproductive, and firms seem to be unproductive in large part because of bad management.
[We need to] identify the determinants of intergenerational mobility, with an eye towards finding policies that increase equality of opportunity. Should we be focusing on increasing access to higher education? Changing the structure of elementary schooling? Revamping thetax code?
[We will see] the study of traditional questions, such as how to use monetary and fiscal policy to eliminate unemployment and control inflation.
The modelling of agents with bounded rationality will help us build economic models (in particular, macroeconomic and financial models) and institutions that better take into account the limitations of human reason.
In an increasingly globalized world, the search for answers will necessarily require a much deeper understanding of three areas that interest me. One, we need a better understanding of the interlinkages across countries in trade, finance, and macroeconomic policy.
I stopped, but it continues in this way. If BigThink asked me, I would say:
I see a big payback to integrating psychology, anthropology, and history into economics more directly, using real-world data to understand how prices, output, and inequality relate to institutions, norms, education, and taxes. And vice versa.
Of course I’m being a bit snide because I find these answers as vapid and trite as any politician’s platitudes.